If she was gloating internally about the steady decline of arch-rival Bank Hapoalim's stock, she wasn't showing it. But it must be a lot easier to cope with the crisis in the financial markets and the fears of global recession when the competition is hurting worse.

Klaus Schwab, the founder and master of the World Economic Forum, couldn't have had better timing for the annual conference. Two days before, stock markets in the Far East collapsed, sweeping along European bourses. The morning the conference began was marked by a drastic rebound - but then asset prices nosedived anew that afternoon after European Central Bank President Jean-Claude Trichet remarked that he was focused on taming inflation.

Yet if you came to Davos, where the elite of the world's business scene convened, expecting to find signs of the markets imploding, of the possibility of global recession, of the crisis at the world's biggest financial institutions, you were challenged to find them. The mood at the Alpine resort seemed grander than ever. The hotels were crammed in Davos and in nearby Cloisters as well, and traffic jams of limousines and giant top-of-the-line jeeps kept the roads impassable. Davos was awash in money, power, businesspeople, politicians, oligarchs and bankers, more than ever before.

The list of participants brimmed with representatives of the most powerful forces in the world. Take the red-haired youngster sitting at the Fault Hotel restaurant, surrounded by former U.S. vice president Dan Quayle and former U.S. treasury secretary John Snow. That was Steve Feinberg of Cerberus, which is the most aggressive, successful and secretive fund on Wall Street these days.

Feinberg shuns the press. At the fund's latest partners' meeting in New York, a few months back, he advised his colleagues, with a straight face, that they'd "have to kill" anybody who nattered to the press. No papers have Feinberg's picture, and he presumably figured that at Davos he'd run into some reporter who could identify him - yet the temptation to rub shoulders with the most powerful people in the world probably overcame any fears.

"Mr. Feinberg, I don't want you to kill me, but perhaps you'd tell us how Cerberus means to go about trying to buy Bank Leumi again?" we asked, trying our luck. "I don't know," he answered. After the six months of torment that Cerberus underwent in Israel during the first attempt to buy the bank, he explained, he isn't sure the fund wants to repeat the adventure. Look what's happening everywhere in the world, he said. The biggest banking institutions are being forced to bring in Middle Eastern and Asian government funds to shore up their equity while in Israel, one of the biggest private equity funds in the world can't buy a bank.

Be that as it may, Bank Leumi probably isn't Feinberg's top priority right now. He has bigger problems, led by the acquisition of Chrysler, which Cerberus completed moments before the subprime meltdown, leading to projections of global recession. The big carmakers are likely to hurt badly if the American consumers scale back spending even more, and the ability to finance gigantic deals by lending has been narrowing by the day. Yet most Wall Street pundits aren't worried about Cerberus. It's a collection of extremely smart guys, and most of its transactions are structured to limit its risk.

Each of the businesspeople and investors at Davos has one terrible transaction that's preying on their minds, one huge loan that's weighing down, and the fear that the 2008 budget that so recently passed the board's vetting might be irrelevant. "I got a phone call this week that we have to rethink our spending," the CEO of a big company grumbled to me. "I told them, why do we bother to go through the whole log ritual of the budget if we reopen it three months later anyway?"

John Connolly, chairman of Deloitte, confirms that the accounting firm is looking at the companies' costs with a microscope. He tells the anecdote of a company that was spending half a million dollars a year on fresh fruit juice to help recruit workers at university campus jobs fairs. He also says that while en route to meet with TheMarker, he ran into a major client with a hot tip: "You're about to meet with a reporter. Remember, however pessimistic and gloomy you are about 2008, that won't be enough for what we face this year."

That's the word at Davos this year. Leaving the financial sector out of it, the last year had smiled upon most of the managers, 2007 having been the fifth year of global growth. But everybody is talking openly, even comfortably, about recession, or a hard landing by the economy in 2008. It isn't fear in the air, but resignation, perhaps because everybody is in the same boat. And unlike six years ago, this time there are no great accounting scandals or investigations or arrests of household names.

One cheerful soul is Steve Roach, the Morgan Stanley economist who's been persistently pessimistic for the last five years, and who had warned that the borrowing spree for mortgages and consumption would lead to recession in America. Two years ago he became persona non grata at Davos and wouldn't talk with the press.

"What do you want from me, I keep getting it wrong," he moaned. Last year he didn't even show up and this year there he was, big as life on the opening panel. And who wasn't there this year? Jacob Frenkel, who remains an extremely popular speaker but who preferred to eschew the opening panel, from which he'd delivered upbeat forecasts in 2007.

"All forecasts are based on certain assumptions," he says now. "Nobody knew or spoke of the subprime crisis a year ago. My forecast hadn't been based on the possibility of a crisis like that."

Nor had Roach's been based specifically on a crisis in the subprime sector, but he certainly had put his finger on the underlying problem years ago: The American economy, which drove the global economy until two years ago, was being driven mainly by the American consumer, who in turn was being driven chiefly by cheap interest rates and rising property prices, which enabled him to consume beyond his means. "The housing market has turned into a giant ATM from which the American consumer withdraws more and more money," Roach said.

Two years ago Roach relocated to the Far East, where he chairs Morgan Stanley's representative office. Though he's a great believer in the Chinese and Indian economies, he doesn't believe they have it in them yet to prevent recession in America and the world. "Private consumption in America is $9 trillion a year, in China it's $1 trillion and in India it's $600 billion," he explains simply. The American consumer is six times bigger than counterparts in China or India, so he doesn't see the East filling the void left by the West: "It's going to be painful, and it isn't going to be short."

Economist Nouriel Roubini, another arch bear, vies with Roach in his dismay: "It isn't just the U.S. - Europe will feel the recession too," he says. There's a property bubble there about to explode and the emerging markets are too complacent. A lot of them are running huge trade deficits and have inflated housing markets, Nouriel says, "And we know how that can end."

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